Freeport-McMoRan Reports Fourth-Quarter and Year Ended December 31, 2015 Results
14:10 26.01.16
PHOENIX --(BUSINESS WIRE)--
Freeport-McMoRan Inc. (NYSE: FCX):
Net loss attributable to common stock totaled $4.1 billion, $3.47 per share, for fourth-quarter 2015 and $12.2 billion, $11.31 per share, for the year 2015. After adjusting for net charges totaling $4.1 billion, $3.45 per share, for fourth-quarter 2015 and $12.1 billion, $11.23 per share, for the year 2015, adjusted net loss totaled $21 million, $0.02 per share, for fourth-quarter 2015 and $89 million, $0.08 per share, for the year 2015.
Consolidated sales totaled 1.15 billion pounds of copper, 338 thousand ounces of gold, 20 million pounds of molybdenum and 13.2 million barrels of oil equivalents (MMBOE) for fourth-quarter 2015 and 4.07 billion pounds of copper, 1.25 million ounces of gold, 89 million pounds of molybdenum and 52.6 MMBOE for the year 2015.
Consolidated sales for the year 2016 are expected to approximate 5.1 billion pounds of copper, 1.8 million ounces of gold, 73 million pounds of molybdenum and 57.6 MMBOE, including 1.1 billion pounds of copper, 200 thousand ounces of gold, 19 million pounds of molybdenum and 12.4 MMBOE for first-quarter 2016.
Average realized prices were $2.18 per pound for copper, $1,067 per ounce for gold and $48.88 per barrel for oil (including $11.39 per barrel for cash gains on derivative contracts) for fourth-quarter 2015.
Consolidated unit net cash costs averaged $1.45 per pound of copper for mining operations and $16.17 per barrel of oil equivalents (BOE) for oil and gas operations for fourth-quarter 2015. Consolidated unit net cash costs are expected to average $1.10 per pound of copper for mining operations and $15 per BOE for oil and gas operations for the year 2016.
Operating cash flows totaled $612 million for fourth-quarter 2015 and $3.2 billion (including $0.4 billion in working capital sources and changes in other tax payments) for the year 2015. Based on current sales volume and cost estimates and assuming average prices of $2.00 per pound for copper, $1,100 per ounce for gold, $4.50 per pound for molybdenum and $34 per barrel for Brent crude oil, operating cash flows for the year 2016 are expected to approximate $3.4 billion (net of $0.6 billion in idle rig costs).
Capital expenditures totaled $1.3 billion for fourth-quarter 2015 (including $0.6 billion for major projects at mining operations and $0.5 billion for oil and gas operations) and $6.35 billion for the year 2015 (including $2.4 billion for major projects at mining operations and $3.0 billion for oil and gas operations). Capital expenditures for the year 2016 are expected to approximate $3.4 billion, including $1.4 billion for major projects at mining operations and $1.5 billion for oil and gas operations, and excluding $0.6 billion in idle rig costs.
In response to further weakening in market conditions in fourth-quarter 2015 and early 2016, FCX today announced additional initiatives to accelerate its debt reduction plans and is actively engaged in discussions with third parties regarding potential transactions. These initiatives follow a series of actions taken during 2015 to reduce costs and capital spending to strengthen FCX's financial position.
Since August 2015, FCX has sold 210 million shares of its common stock and generated gross proceeds of approximately $2 billion under its at-the-market equity programs.
At December 31, 2015, consolidated debt totaled $20.4 billionand consolidated cash totaled $224 million. At December 31, 2015, FCX had no amounts drawn under its $4.0 billion credit facility.
Freeport-McMoRan Inc. (NYSE: FCX) reported a net loss attributable to common stock of $4.1 billion ($3.47 per share) for fourth-quarter 2015 and $12.2 billion ($11.31 per share) for the year 2015, compared with a net loss of $2.9 billion ($2.75 per share) for fourth-quarter 2014 and $1.3 billion ($1.26 per share) for the year 2014. FCX’s net loss attributable to common stock included net charges totaling $4.1 billion ($3.45 per share) in fourth-quarter 2015, $12.1 billion ($11.23 per share) for the year 2015, $3.1 billion ($3.01 per share) in fourth-quarter 2014 and $3.35 billion ($3.23 per share) for the year 2014, primarily for the reduction of the carrying value of oil and gas properties and other items described in the supplemental schedule, "Adjusted Net (Loss) Income," on page IX, which is available on FCX's website, "fcx.com."
Richard C. Adkerson, President and Chief Executive Officer, said, "As we enter 2016, our clear and immediate objective is to restore FCX’s balance sheet and position the Company appropriately to enhance shareholder value in the current market environment. We are responding swiftly and decisively to achieve this objective. Our high-quality asset base provides opportunities for significant debt reduction while retaining a substantial business with attractive low-cost, long-lived reserves and resources that will enable our shareholders to benefit from improved conditions in the future. We achieved several important operational milestones during the fourth quarter while taking aggressive actions to adjust our plans in response to the decline in prices for our primary products.”
SUMMARY FINANCIAL DATA
§Three Months Ended Years Ended
§December 31, December 31,
§2015 2014 2015 2014
§(in millions, except per share amounts)
Revenuesa,b
§$ 3,795 $ 5,235 $ 15,877 $ 21,438
Operating (loss) incomea,b $ (4,100 ) $ (3,299 ) $ (13,382 ) $ 97
Net loss attributable to common stockb,c,d $ (4,081 ) $ (2,852 ) $ (12,236 ) $ (1,308 )
Diluted net loss per share of common stockb,c,d $ (3.47 ) $ (2.75 ) $ (11.31 ) $ (1.26 )
Diluted weighted-average common shares outstanding 1,177 1,039 1,082 1,039
Operating cash flowse $ 612 $ 1,118 $ 3,220 $ 5,631
Capital expenditures $ 1,298 $ 1,800 $ 6,353 $ 7,215
At December 31:
Cash and cash equivalents $ 224 $ 464 $ 224 $ 464
Total debt, including current portion $ 20,428 $ 18,849 $ 20,428 $ 18,849
a. For segment financial results, refer to the supplemental schedules, "Business Segments," beginning on page XII, which are available on FCX's website, "fcx.com."
b. Includes unfavorable adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods totaling $72 million ($38 million to net loss attributable to common stock or $0.03 per share) in fourth-quarter 2015, $28 million ($13 million to net loss attributable to common stock or $0.01 per share) in fourth-quarter 2014, $107 million ($53 million to net loss attributable to common stock or $0.05 per share) for the year 2015 and $118 million ($65 million to net loss attributable to common stock or $0.06 per share) for the year 2014. For further discussion, refer to the supplemental schedule, "Derivative Instruments," on page XI, which is available on FCX's website, "fcx.com."
c. Includes net charges totaling $4.1 billion ($3.45 per share) in fourth-quarter 2015, $3.1 billion ($3.01 per share) in fourth-quarter 2014, $12.1 billion ($11.23 per share) for the year 2015 and $3.35 billion ($3.23 per share) for the year 2014, primarily for the reduction of the carrying value of oil and gas properties and other items described in the supplemental schedule, "Adjusted Net (Loss) Income," on page IX, which is available on FCX's website, "fcx.com."
d. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. For a summary of net impacts from changes in these deferrals, refer to the supplemental schedule, "Deferred Profits," on page XI, which is available on FCX's website, "fcx.com."
e. Includes net working capital sources (uses) and changes in other tax payments of $31 million for fourth-quarter 2015, $67 million for fourth-quarter 2014, $373 million for the year 2015 and $(632) million for the year 2014.
REVISED OPERATING PLANS, INITIATIVES AND DEBT REDUCTION PLANS
FCX announced today additional initiatives to accelerate its debt reduction plans. FCX will continue to focus on cost and capital management and cash flow generation from its operations under the current weak commodity price environment and is taking further immediate actions to accelerate its debt reduction plans and enhance shareholder value through pursuing asset sales and joint venture transactions. Several initiatives are currently being advanced, including an evaluation of alternatives for the oil and gas business (FM O&G) as well as several transactions involving certain of its mining assets. FCX expects to achieve progress on these initiatives during the first half of 2016.
During 2015, FCX took aggressive actions to enhance its financial position in response to market conditions, including significant reductions in capital spending, production curtailments at certain North and South America mines and actions to reduce operating, exploration and administrative costs. These actions included:
A 29 percent reduction in estimated 2016 capital expenditures, including idle rig costs (from $5.6 billion in July 2015 to $4.0 billion in January 2016)
Reductions of 350 million pounds in annual copper production and 34 million pounds in annual molybdenum production to improve cash flow at low prices
A 28 percent reduction in estimated average unit net cash costs for the year 2016 ($1.10 per pound of copper estimated for 2016, compared with $1.53 per pound in 2015)
A 19 percent reduction in estimated oil and gas cash production costs for 2016 (approximately $15 per BOE estimated for 2016, compared with $18.59 per BOE in 2015)
Suspension of FCX's annual common stock dividend of $0.20 per share (an approximate $250 million in savings based on 1.25 billion common shares outstanding at December 31, 2015)
Completion of approximately $2 billion in equity sales from at-the-market equity programs
Commodity prices weakened further in fourth-quarter 2015 and early 2016. Current copper spot prices of $2.00 per pound are 15 percent below prices at September 30, 2015, and the current Brent crude spot price of $30.50 per barrel is 37 percent below prices at September 30, 2015.
While we believe the physical copper market is essentially balanced, concerns about the global economy, and particularly the weakening of the Chinese economy, have dominated financial market sentiment and negatively impacted commodity prices, including copper. Oil prices have also weakened to multi-year lows in response to excess global supplies and economic conditions.
Current market conditions and uncertainty about the timing of economic and price recovery require FCX to take further aggressive actions to strengthen its financial position, reduce debt and re-focus its portfolio of assets. FCX’s strategy will focus on its global leading position in the copper industry. FCX will continue to manage its production activities, spending on capital projects and operations, and the administration of its business to enhance cash flows, and intends to complete significant asset sale transactions to reduce debt.
FCX remains confident about the longer term outlook for copper prices based on the global demand and supply fundamentals. With its established reserves and large-scale current production base, its significant portfolio of undeveloped resources, and its global organization of highly qualified and dedicated workers and management, FCX is well positioned to generate significant asset sale proceeds while retaining an attractive portfolio of high-quality assets.
Mining Operations. Following revisions to its mine plans, all of FCX’s copper production is cash flow positive at current spot prices, net of sustaining capital expenditures. Additionally, FCX has evaluated its current operating plans at lower prices to ensure that the current plans are appropriate. FCX will continue to monitor market conditions and intends to make further adjustments as required to maintain all operations as cash flow positive. The Cerro Verde expansion project, which was completed in late 2015, combined with strong operating performance in North America and Africa and expected higher grades from Grasberg in the second half of 2016 are expected to enable FCX to generate positive cash flow from its mining business in 2016 at current prices.
Based on current sales volume and cost estimates and assuming average prices of $2.00 per pound copper, $1,100 per ounce gold and $4.50 per pound of molybdenum, FCX estimates that operating cash flows from the mining business for the year 2016 would exceed capital expenditures from the mining business by approximately $2 billion. Capital expenditures from the mining business are expected to total $1.9 billion in 2016 (including $0.5 billion for sustaining capital, $0.8 billion for Grasberg underground development and $0.4 billion in remaining costs for the Cerro Verde expansion). FCX continues to review its capital projects and costs to maximize cash flow in a weak commodity price environment and to preserve its resources for anticipated improved future market conditions.
Oil & Gas Operations. In October 2015, FCX announced that its Board is undertaking a strategic review of alternatives for FM O&G. FCX and its advisors are actively engaged with interested participants in a process to evaluate opportunities that include a sale of assets and joint venture arrangements that would generate cash proceeds for debt repayment. FM O&G’s high-quality asset base, substantial underutilized Deepwater Gulf of Mexico (GOM) infrastructure, large inventory of low-risk development opportunities, and talented and experienced personnel and management team provide alternatives to generate value.
In the interim, FCX continues to manage oil and gas costs and capital expenditures aggressively. FM O&G is undertaking a near-term deferral of exploration and development activities by idling the three deepwater drillships it has under contract. Past investments are expected to enable production to be increased from fourth-quarter 2015 rates of 144 thousand barrels of oil equivalents (MBOE) per day to an average of 157 MBOE per day in 2016 and 2017, and cash production costs to decline to approximately $15 per BOE in 2016 and 2017.
FM O&G expects to incur idle rig costs associated with its drillship contracts totaling an estimated $0.6 billion in 2016 and $0.4 billion in 2017.
Cash Flow Outlook. Based on copper prices of $2.00 per pound and Brent crude oil prices of $34 per barrel, FCX estimates consolidated operating cash flows of $3.4 billion (net of approximately $0.6 billion in idle rig costs) and capital expenditures of $3.4 billion for the year 2016. The impact of price changes on 2016 operating cash flows would approximate $440 million for each $0.10 per pound change in the average price of copper, $55 million for each $50 per ounce change in the average price of gold, $60 million for each $2 per pound change in the average price of molybdenum and $135 million for each $5 per barrel change in the average Brent crude oil price.
Using similar price assumptions and the recent 2017 future price of $40 per barrel for Brent crude oil, FCX estimates consolidated operating cash flows of $3.5 billion (net of approximately $0.4 billion in idle rig costs) and capital expenditures of $2.3 billion for the year 2017.
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